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The Coronavirus Employer Cash Flow Boost Measure: Eligibility Criteria

Luke Livingston recently appeared, successfully, for the Commissioner of Taxation in the first proceeding to construe and apply the eligibility criteria in the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 (Cth).

The Act is an important economic stimulus measure, enacted in March 2020 in response to the COVID-19 pandemic. It provides for two cash payments, called “cash flow boosts”, to eligible employers throughout Australia.

The issue in the proceeding was whether the requirement in s 5(6)(a) of the Act was satisfied – namely that “the entity made a taxable supply in a tax period that applied to it that … ended before 12 March 2020” – in circumstances where the applicant had only been incorporated in January 2020. Once incorporated, the company had taken over a business previously conducted by its controller, as a sole trader.

The Administrative Appeals Tribunal (Deputy President McCabe and Senior Member Olding) rejected the applicant’s submission that the word “it” in s 5(6)(a) refers to the taxable supply and not to the entity making the supply. Instead, accepting the Commissioner’s submissions and affirming the decision under review, the Tribunal concluded that, on the proper construction of s 5(6)(a), the word “it” refers to the entity. Thus, the correct reading of s 5(6)(a) is: “the entity made a taxable supply in a tax period that applied to [the entity] that . . . ended before 12 March 2020”.

The Tribunal also rejected the applicant’s submission that the defined term “entity”, with its inclusion of individuals, companies and other entities and, in particular, groups of entities, is capable of embracing the single business conducted (consecutively) by the sole trader and his company.

The Tribunal observed that, on the face of the evidence, the applicant appeared to have struggled with the impact of the pandemic and may be a worthy recipient of financial assistance. Nonetheless, the Tribunal concluded at [65]-[66] that:

No amount of appeal to perceived policy objectives can make it permissible to give provisions a construction that is not reasonably open on the text chosen by Parliament when considered in its context. The Tribunal must seek to ascertain and apply the intention of Parliament as manifested in the words of the legislation, read in their context and informed by an understanding of the underlying policy determined by permissible means. The Tribunal does not apply the policy itself, still less perceptions of policy detail that are neither stated nor necessarily to be inferred from the legislation.

The Tribunal would exceed its constitutional status as an administrative body forming part of the executive government if it were to endeavour to fill perceived gaps in legislation through the strained interpretations urged upon us by the applicant. Any view that SBG or entities in analogous circumstances should qualify for cash flow boosts is a matter for the Parliament.

The decision, which provides significant assistance in understanding the application of the eligibility requirements under the Act, may be found here.

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